question

Product quality has improved.

answer

Under what circumstances do rates of economic growth understate the growth of economic well-being?

question

move toward more democratic forms of government.

answer

Countries that have experienced modern economic growth have also tended to:

question

Africa

answer

Which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

question

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs.

answer

Economic growth rates in follower countries:

question

he United States has a higher percentage of the working-age population in the labor force and because U.S. employees average about 20 percent more hours worked per year.

answer

Real GDP per capita in the United States (as of 2007) exceeds that of France primarily because:

question

A well-enforced system of patents and copyrights.

answer

Which of the following institutional structures is most likely to promote growth?

question

1, 2, 5, and 6 only

answer

Use the list below to answer the following questions: 1. Improvements in technology 2. Increases in the supply (stock) of capital goods 3. Purchases of expanding output 4. Obtaining the optimal combination of goods, each at least-cost production 5. Increases in the quantity and quality of natural resources 6. Increases in the quantity and quality of human resources Which set of items in the above list would shift an economy's production possibilities curve outward?

question

real GDP declined.

answer

Suppose that an economy's labor productivity fell by 3 percent and its total worker-hours remained constant between year 1 and year 2. We could conclude that this economy's:

question

the number of worker-hours must be 500.

answer

Suppose total output (real GDP) is $4000 and labor productivity is $8. We can conclude that:

question

labor force participation rate.

answer

The percentage of the working-age population in the labor force (= employed + officially unemployed) is called the:

question

an increase in the size of the labor force

answer

Which of the following would not be expected to increase labor productivity?

question

technological advances account for about 40 percent of U.S. productivity growth.

answer

Empirical studies suggest that:

question

increased the average productivity of labor.

answer

The historical reallocation of labor from agriculture to manufacturing in the United States has

question

the reallocation of labor from less-productive to more-productive uses.

answer

Economies of scale refer to:

question

29 percent

answer

What percentage of the U.S. adult population has a college or post-college education (as of 2009)?

question

9th and 11th, respectively.

answer

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2007):

question

23 years.

answer

If the growth trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about:

question

network effects.

answer

Increases in the value of a product to each user, including existing users, as the total number of users rises are called:

question

microchip.

answer

The fundamental invention underpinning the recent rise in the average rate of productivity growth is the:

question

increased entrepreneurial activity, application of information technology, and global competition.

answer

Economists who believe that the recent rise in the average rate of productivity growth may be long-lasting claim that the above-normal economic growth in the United States between 1995 and 2009 was caused by:

question

occurs, not because of growth, but because common resources are treated as free goods.

answer

Proponents of economic growth say that pollution:

question

durables purchases are postponable.

answer

The production of durable goods varies more than the production of nondurable goods because:

question

real domestic output falls.

answer

A recession is defined as a period in which:

question

Unexpected financial bubbles that eventually burst. Shocks to the money supply by the nation's central bank. Supply shocks caused by major innovations.

answer

Which of the following is seen by economists as an underlying cause of business cycle fluctuations?

question

Prices are sticky in the short run.

answer

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

question

frictionally unemployed.

answer

Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kara presently is:

question

higher than the full-employment rate of unemployment.

answer

The natural rate of unemployment is:

question

unemployed.

answer

Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is:

question

decline.

answer

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would:

question

structural unemployment.

answer

Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon where she anticipates that a new job will be available. We can say that Susie is faced with:

question

a deficiency of spending on goods and services.

answer

Cyclical unemployment results from:

question

employed.

answer

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as

question

the official unemployment rate will remain unchanged.

answer

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result:

question

$320 billion.

answer

the official unemployment rate will remain unchanged.:

question

the actual unemployment rate will be higher than the natural unemployment rate.

answer

If actual GDP is less than potential GDP:

question

prices on average are rising, although some particular prices may be falling.

answer

Inflation means that:

question

deflation of 3.33 percent.

answer

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

question

3.5 percent.

answer

Between 1980 and 2000 the price level approximately doubled. The average annual rate of inflation over this 20-year period was about:

question

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

answer

Demand-pull inflation:

question

moves the economy inward from its production possibilities curve.

answer

Cost-push inflation:

question

a negative supply shock.

answer

Cost-push inflation may be caused by:

question

Demand-pull inflation

answer

Which of the following would most likely occur during the expansionary phase of the business cycle?

question

rise by about 15 percent.

answer

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

question

tie wage increases to changes in the price level.

answer

Cost-of-living adjustment clauses (COLAs):

question

3 percent.

answer

Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:

question

consume is three-fifths.

answer

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to:

question

all the points at which consumption and income are equal.

answer

The 45-degree line on a graph relating consumption and income shows:

question

increase absolutely, but decline as a percentage of income.

answer

The consumption schedule is drawn on the assumption that as income increases, consumption will:

question

relatively stable.

answer

In contrast to investment, consumption is:

question

APC is greater than 1.

answer

Suppose a family's consumption exceeds its disposable income. This means that its:

question

saving is zero.

answer

At the point where the consumption schedule intersects the 45-degree line:

question

a currently low level of household debt

answer

Which of the following will not tend to shift the consumption schedule upward?

question

will shift downward.

answer

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule:

question

both the consumption and saving schedules downward.

answer

When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift:

question

enable more investment projects to be undertaken profitably.

answer

The investment demand slopes downward and to the right because lower real interest rates:

question

purchase the machine because the expected rate of return exceeds the interest rate.

answer

Assume a machine which has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent the firm should:

question

an increase in the real rate of interest will reduce the level of investment.

answer

Given the expected rate of return on all possible investment opportunities in the economy:

question

$10.

answer

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. If the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

question

have no effect on the location of the investment-demand curve.

answer

Other things equal, a 10 percent decrease in corporate income taxes will:

question

a decrease in business taxes.

answer

The investment demand curve will shift to the left as a result of:

question

the percentage increase in purchasing power that the lender receives on a loan.

answer

The real interest rate is:

question

22 percent.

answer

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

question

all of these contribute to the instability.

answer

Investment spending in the United States tends to be unstable because:

question

increase by $10 billion.

answer

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will:

question

consumption by $80 billion.

answer

If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase:

question

in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.

answer

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:

question

Prices are fixed.

answer

The aggregate expenditures model is built upon which of the following assumptions?

question

does not change when real GDP changes.

answer

In the aggregate expenditures model, it is assumed that investment:

question

business inventories will fall.

answer

In a private closed economy, when aggregate expenditures exceed GDP:

question

we can expect businesses to lower the level of production.

answer

If an unintended increase in business inventories occurs:

question

planned; actual

answer

In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving.

question

upward and increase aggregate expenditures.

answer

In the aggregate expenditures model, technological progress will shift the investment schedule:

question

U.S. real GDP will fall.

answer

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then:

question

a country's net exports to fall.

answer

If the dollar appreciates relative to foreign currencies, we would expect:

question

depress real output and employment in the U.S. economy.

answer

Other things equal, serious recession in the economies of U.S. trading partners will:

question

Sa + M + T = Ig + X + G.

answer

In a mixed open economy the equilibrium GDP is determined at that point where:

question

$40 billion.

answer

Assume the MPC is .8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by:

question

increase taxes by $28 billion.

answer

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is 0.75. The Federal government now finds that it must increase spending on military goods by $21 billion in response to deterioration in the international political situation. To sustain full-employment-noninflationary GDP government must:

question

the larger the MPC.

answer

An increase in taxes will have a greater effect on the equilibrium GDP:

question

a $20 billion decrease in government spending

answer

Which of the following would reduce GDP by the greatest amount?

question

MPS in this economy is .4.

answer

Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion. On the basis of this information we can say that the:

question

downward by $16 billion.

answer

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will shift:

question

$9 billion.

answer

If the MPC in an economy is .9, a $1 billion increase in government spending will ultimately increase consumption by:

question

shift the aggregate expenditures line upward.

answer

In an aggregate expenditures diagram equal increases in government spending and in lump-sum taxes will:

question

GDP will remain at $400 billion unless aggregate expenditures change.

answer

If the economy is in equilibrium at $400 billion of GDP and the full-employment GDP is $500 billion:

question

a rapid decline in investment spending.

answer

The recessionary expenditure gap associated with the recession of 2007-2009 resulted from:

question

an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

answer

The interest-rate effect suggests that:

question

leftward by $40 billion at each price level.

answer

If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift:

question

per-unit production costs rise as the economy moves toward and beyond its full-employment real output.

answer

The aggregate supply curve (short-run) is upsloping because:

question

2.

answer

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question(s) on the basis of this information. Refer to the above information. The level of productivity is:

question

$2

answer

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question(s) on the basis of this information. The per unit cost of production in the economy described above is:

question

input prices are fixed, but output prices are flexible

answer

The short-run aggregate supply curve represents circumstances where:

question

eventually rise and fall to match upward or downward changes in the price level.

answer

The economy's long-run AS curve assumes that wages and other resource prices:

question

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve.

answer

Graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a:

question

the price level is inflexible downward and a recession has occurred.

answer

If aggregate demand decreases, and as a result, real output and employment decline but the price level remains unchanged, it is most likely that:

question

diminished if inflation occurs

answer

The size of the multiplier associated with an initial increase in spending will be:

question

above-market-wages that bring forth so much added work effort that per-unit production costs are lower than at market wages.

answer

Efficiency wages are:

question

wage contracts.

answer

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of:

question

reduce prices when a decline in aggregate demand occurs.

answer

The fear of unwanted price wars may explain why many firms are reluctant to:

question

the composition of GDP has changed from larger, heavier items such as earth movers and steel products toward smaller, lighter items such as software and microchips.

answer

Relative to previous decades, the U.S. economy is less affected by changes in the price of oil partly because:

question

intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

answer

Discretionary fiscal policy refers to:

question

decreasing taxes by $25 billion

answer

If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:

question

an excess of government expenditures over tax receipts.

answer

Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward:

question

increase tax rates and/or reduce government spending.

answer

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price level stability under these conditions the government should:

question

shift the AD curve to the left.

answer

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will:

question

a $30 billion decrease in government spending

answer

Which of the following represents the most contractionary fiscal policy?

question

larger is the economy's MPC.

answer

A tax reduction of a specific amount will be more expansionary, the:

question

require no legislative action by Congress to be made effective.

answer

A major advantage of the built-in or automatic stabilizers is that they:

question

Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.

answer

Which of the following best describes the built-in stabilizers as they function in the United States?

question

tax revenues would exceed government expenditures if full employment were achieved.

answer

If the economy has a cyclically-adjusted budget surplus, this means that:

question

contractionary fiscal policy.

answer

Suppose the government purposely changes the economy's cyclically-adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government is engaging in a(n):

question

rose to -7.3 percent of potential GDP in 2009.

answer

The cyclically-adjusted budget deficit for the United States:

question

5.

answer

(1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The operational lag of fiscal policy is reflected in event(s):

question

1 and 2

answer

(1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The recognition lag of fiscal policy is reflected in events:

question

3 and 4.

answer

(1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The administrative lag of fiscal policy is reflected in events:

question

politicians will manipulate the economy to enhance their chances of being reelected.

answer

The political business cycle refers to the possibility that:

question

increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.

answer

The crowding-out effect of expansionary fiscal policy suggests that:

question

An increase in government spending on infrastructure that increases private sector productivity.

answer

Which of the following fiscal policy actions is most likely to increase aggregate supply?

question

the Federal government owes to holders of U.S. securities.

answer

The public debt is the amount of money that:

question

increased by $20 billion.

answer

Suppose the Federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have:

question

reducing national income and therefore tax revenues.

answer

Recessions have contributed to the public debt by:

question

43%

answer

What percentage of the U.S. public debt is held by Federal agencies and the Federal Reserve?

question

the bulk of the public debt is owned by U.S. citizens and institutions.

answer

To say that "the U.S. public debt is mostly held internally" is to say that:

question

reducing the current level of investment.

answer

The most likely way the public debt burdens future generations, if at all, is by:

question

construction of highways

answer

Which of the following is the best example of public investment?

question

5:1; 2:1

answer

In 1960 the ratio of workers to Social Security and Medicare beneficiaries was ______; by 2040 it is projected to be _________.

question

Restricting Immigrant skilled working age

answer

Which of the following would NOT help to relieve the Social Security and Medicare shortfalls?

question

Creates jobs by responsibly paying for investments in education, manufacturing, clean energy, infrastructure, and small business. Includes $1.8 trillion of additional deficit reduction over 10 years, bringing total deficit reduction achieved to $4.3 trillion. Represents more than $2 in spending cuts for every $1 of new revenue from closing tax loopholes and reducing tax benefits for the wealthiest. Deficit is reduced to 2.8% of GDP by 2016 and 1.7% by 2023 with debt declining as a share of the economy, while protecting the investments we need to create jobs and strengthen the middle class. Includes $400 billion in health savings that crack down on waste and fraud to strengthen Medicare for years to come.

answer

President's Budget Proposal

question

-.1%

answer

4th Quarter GDP

question

.4

answer

Final GDP report

question

7.6%

answer

March Unemployment

question

94.8; +.5

answer

Feb. LEI

question

105.1; +.2

answer

Feb. CEI

question

1.1; (-.6)

answer

March Producer Price Index

question

+.7

answer

March Consumer Price Index

question

.2

answer

March CPI one month change in core

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